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How does the bankruptcy means test work?

There are many different reasons you may be considering filing for bankruptcy in Ohio, and you may have questions about whether a Chapter 7 or a Chapter 13 bankruptcy might be right for you. While there are numerous differences between the two types, whether you are ultimately able to pursue a Chapter 7 bankruptcy will depend on whether you are able to pass what is known as the bankruptcy means test.

Essentially, per Nerdwallet, the bankruptcy means test determines whether you can work toward debt forgiveness through a Chapter 7 bankruptcy, or if you instead must do so via a Chapter 13 bankruptcy. To do so, the test assesses a number of areas to get a sense of how much disposable income you have available, including the size of your family, your income and your expenses. Please note, however, that the means test primarily covers consumer debts, so any business debts you may have typically will not factor in during the means test.

If your means test reveals that your household income falls below that of the median family on your state, you automatically pass the means test. If you do not immediately pass the test, the next step involves gathering documentation related to your expenses over the course of the last six months. If, through doing so, you can show that your disposable income is sufficiently low enough, you may still be able to file for a Chapter 7 bankruptcy. If you do not qualify for this type of bankruptcy, you can consider a Chapter 13 bankruptcy, or you can wait six months and take the means test again to see if anything changes.

This information about the bankruptcy means test is informative, but it is not a replacement for legal advice.

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